BoT: Capital market not affected much by interest cut

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BANGKOK, 14 March 2014  The Bank of Thailand (BoT) has confirmed that the recent reduction of the benchmark rate by 0.25% is yet to create any substantial effects on the capital market as it was within the expectation of financial institutions. 

Commenting on the Monetary Policy Committee’s latest decision to adjust down the policy interest rate to 2% per annum, BoT Spokesperson Roong Mallikamas pointed out that the change had already been foreseen by the capital market. Once the adjustment was made, she claimed that commercial banks could react in no time by lowering their interest rates accordingly.

Ms Roong said the exchange rates had experienced no fluctuations while the sales of bonds were still stable. In the meantime, limited impacts were expected from the Fed’s quantitative easing (QE) tapering policy as well as the slowdown in Chinese economic growth, thanks to the strong fundamentals of the Thai economy.

However, the central bank spokesperson noted that there was a signal of a real estate slump, resulting from shrinking demand among home buyers and fewer openings of new projects. Core inflation was also rising from the higher prices of food and energy, though in a gradual manner.

Ms Roong concluded that a relaxed monetary policy was still necessary, adding that further reduction of the benchmark rate was possible.